“Price check on register seven – inner city residential apartment.”

Australia’s big supermarket giants have been slowly but surely extending their reach into the provision of other retail services for years in a bid to up their already sizeable market share, including petrol, mobile phones, alcohol, electronics, hardware, car insurance and even pet insurance.

Now, in a somewhat left of centre move, Coles and Woolies are branching out yet again – into the residential apartment market. But I’m not sure that they’ve got their timing right.

According to a report in The Age, Melbourne is set to grow its already significant high density property base with plans in the pipeline for large supermarket/residential developments.

The strategy is a smart one by the grocery giants, who will be able to access a large consumer base thanks to the city’s booming population, while offsetting the high cost of inner city real estate through apartment sales.

The proposal has attracted its fair share of debate, with Woolworths’ plans to develop a supermarket and 16 storey twin residential towers accommodating 304 apartments in North Melbourne’s Canning Street, copping plenty of resistance from locals.

Undeterred however, a spokesman for Woolworths said that while the company was a retailer ”first and foremost”… ”our property team have expertise in tailoring developments to suit a particular site or community. In some cases where there is high demand for new residences – and this is reflected in the market value of a property – a mixed-use development will make sense,” he said.

”North Melbourne is a community where many more Melbournians want to live and work and where council are projecting a large population increase”.

In a bid to be first cab off the rank, Woolworths have already commenced construction on what is believed to be Melbourne’s first supermarket-apartment development on the corner of Highett and Graham roads, Highett.

Once completed, the project will include a four-storey, 126-apartment development above a Woolworths supermarket and retail shops with basement parking.

Not to be outdone, Coles intends to redevelop the Richmond Plaza Centre into a $250 million supermarket, retail and apartment precinct, with a 12 storey residential building housing 333 apartments.

Coles’ plans have not been welcomed with open arms by Richmond residents however, particularly the new owners of the four terrace homes refurbished and sold on TV’s The Block, which happen to be directly across from the site.

But a spokesman for Coles said mixed-use developments were becoming increasingly common, particularly in the inner-city.

”Coles is typically involved in such developments as a retail tenant, though we will occasionally act as a retail site developer if we determine that is the most appropriate course of action.”

He said the company’s primary aim was to secure space for new stores, ”not to become directly involved in residential property development”.

My thoughts:

While these moves by the supermarket chains make sense in the long term– it’s a practical type of development that will occur more frequently as our cities mature; I’m not sure that they’ve got their timing right in the short term.

Melbourne’s CBD and inner suburban residential housing sector is already oversupplied with off the plan apartment projects and bringing more on stream in the next few years will only add to the oversupply and dampen prospects of capital growth.

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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au

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